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Bayer Snaps Up Rights to Two Cancer Drugs from Lilly’s $8B Loxo Deal

Bayer has just reclaimed some rights to two drugs from Loxo Oncology, which means it’s going to take more work for Loxo’s buyer, Eli Lilly, to justify the $8 billion it is paying for the company.

Lilly (NYSE: LLY) this morning closed its buyout of Loxo, a developer of cancer drugs that target specific genetic abnormalities on tumors. That buyout, in turn, triggered a “change of control” clause baked into a 2017 partnership between Loxo and Bayer, the German pharmaceutical giant.

Under the 2017 deal, Bayer paid Loxo $400 million for European rights and partial U.S. rights to two drugs—the now-approved larotrectinib (Vitrakvi), and the experimental LOXO-195—with the option to claim full rights to both if Loxo were bought. Minutes after Lilly announced it closed on Loxo, Bayer exercised that option and claimed full control of both drugs. Bayer will now pay royalties to Lilly (NYSE: LLY) on sales of larotrectinib, and LOXO-195, too, if the latter makes it to market.

With Bayer’s decision, Lilly will now have to rely on royalty payments from Bayer and the success of other Loxo drugs for its bet to pay off. Aside from larotrectinib and LOXO-195, Loxo’s pipeline includes two drugs in human testing: LOXO-292, a drug that targets cancers with alterations to RET gene that are found lung, thyroid, and other cancers; and LOXO-305, which aims at cancers with mutations to an enzyme called Bruton’s tyrosine kinase. Last year, Loxo released positive data from Phase 1 studies of LOXO-292. LOXO-305, being developed for patients whose tumors develop resistance to currently available BTK inhibitor drugs—like the big-selling blood cancer drug ibrutinib (Imbruvica)—is also in early human trials.

Loxo’s pipeline also includes other cancer drugs in preclinical development.